Former Defense Secretary Leon Panetta on Monday faulted the White House and Republican leaders for failing to negotiate on major budget issues, saying a complete lack of trust between both sides was punishing Americans for political dysfunction.

“When you are operating by crisis, I think there’s enough blame to go around,” Mr. Panetta said at a Seib & Wessel breakfast hosted by The Wall Street Journal. “Everybody has to engage, and engage – as I said – on the basis of trust. This town has gotten a lot meaner in the last few years.”

During the course of the hourlong breakfast, Mr. Panetta used the words “engage” or “engagement” 20 times.

Mr. Panetta, a Democrat and former congressman from California, was Secretary of Defense from 2011 until earlier this year. He served in the Clinton administration as director of the White House Office of Management and Budget from 1993 until 1994 and White House chief of staff from 1994 until 1997.

Mr. Panetta said Mr. Obama had to engage Republicans in order to tackle the deficit talks head-on so he can work on other legacy-type issues, such as immigration, for the remainder of this term in office. He said Congress needed to target close to $2 trillion in addition deficit-reduction over 10 years, something he said could be accomplished through a combination of spending cuts and tax increases.

He said lawmakers and the White House needed to resolve their differences, end the government shutdown, raise the debt ceiling, and then go to a conference on the budget where both sides would have to put “everything on the table.” He said this would require “tough choices” by both sides, but he said a deal could be reached if Democrats and Republicans were willing to make concessions.

Mr. Panetta said there were many culprits for Washington’s dysfunction, such as nonstop fundraising, redistricting, and fewer personal relationships between lawmakers. But he also said political leaders lacked the resolve that was present during budget negotiations in the Reagan and Clinton administrations.

“I don’t think they ought to try to come up with some razzle-dazzle super-committee or group of muckity-mucks from the outside world,” he said. “That hasn’t worked. They are going to have to do it in the context of the conference of the budget.”

Mr. Panetta said the White House had tried to engage Republicans on the budget before, but he suggested the Obama administration felt burned by past attempts and no longer felt a deal could be achieved.

Lexey Swall for The Wall Street Journal

Washington Bureau Chief Jerry Seib, left, and Leon Panetta

“You can’t, just because you’ve engaged in some set of negotiations and they haven’t gone anywhere, for one reason or another there’s been a breakdown, [that] is no reason to walk away from the table,” he said. “In this town, you’ve got to stay with it and stay at it.”

Similarly, Mr. Panetta faulted what he described as “extreme members of the House” of Representatives who did not get their way on the health-care law and decided “to take out their vengeance on the American people and hurt their fellow citizens.”

He said if the White House felt too many Republicans cringed at the idea of agreeing to anything that Mr. Obama helped design, he should consider delegating negotiating power to someone else to try and break the ice.

“If the president, for whatever reason, feels he can’t do it because the Republicans don’t want to confront him, then he ought to be willing to delegate that responsibility to someone who can do it,” he said.

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